Hi there! I’m Liz, the Chief Mom Officer, and I’m thankful to Brian for the opportunity to stop by his site today and discuss one of my favorite topics teaching kids money skills.
As the mother of three boys – 15, 12, and 4 – it’s a subject near and dear to my financial heart. Today I’ll explore whether teaching basic financial literacy is the parent’s job, the school job, or maybe both.
A student can, in a majority of states, go through all of high school and college without ever taking a single course teaching them to manage their money. Wise money management is something that applies to every career, every income level, and will be needed throughout their lives – and these kids leave school with no idea how to do it. Many public schools find time to teach cursive writing (which will be forgotten in adulthood, let’s face it) and calculus (used in few jobs), but don’t teach you how compound interest works.
Twenty states in the US mandate high school students to take a course in economics. Now I’ve taken several economics courses in both macro- and microeconomics, and very little of it applies to personal finance. What about courses in personal finance, then? Apparently, only 17 states mandate that. Our students sit in the middle of the pack worldwide, right between Latvia and Russia, in financial literacy. I think we can do better than that.
High school students mandated to take basic financial literacy courses have better average credit scores and lower debt delinquency than those that don’t have a similar mandate.
So should teachers be doing more to teach financial literacy in school? Or is it a parent’s job?
Parents Teaching Kids Money Skills
We don’t rely on schools, and the public school system, to teach certain things to our kids. Instead, we leave them up to parents. Examples include serious stuff like religion and politics, but also ethics, fashion, and popular culture. Although kids might pick up on some of these things in the public education system, we don’t have courses on fashion design and video games as mandatory for everyone.
The United States firmly believes some things are best left to parents to teach. The separation of church and state is codified in law, but other things are more traditional. There’s also a lot of subjectivity in these topics. Take fashion, for instance. What one group of people consider to be cool, another does not. So unless you’re attending a fashion college, schools stay away from the subject.
So, is financial literacy one of those things?
Many believe so. They think that school teachers should focus on more substantial education subjects like math, history, and science. Leave the mundane things like how to balance a checkbook and how to get a mortgage to parents – and of course, the internet.
The main issue with this thinking is that parents can’t effectively teach what they don’t know. Two-thirds of Americans can’t pass a basic financial literacy test. A third don’t know how to calculate interest rates. Almost seventy-five percent don’t know what happens to bond prices when interest rates rise. How can you teach your kids these things when you don’t know them yourself?
Of course, if you’re reading this article, you’re interested in learning about money. But think about your friends, neighbors, colleagues, and all the other people you encounter during the day. How many of them are reading articles on the internet about money? How many money-smart people do you know?
Likely the only way to inspire a sea change in the level of financial literacy in this country is to teach kids in schools. But in the absence of regulation or classes at school, then we parents must take the reins with teaching our own children.
What to Teach?
This is my dream top-8 lesson plan of money skills I would love to see kids know by the time they finish their higher education program:
- Budgeting – how to manage income and expenses. Including an insight into common expenses, they’ll face as adults
- Debt – Credit cards, student loans, car loans, and mortgages. With a particular focus on student loans, so they don’t sign away their future by being uninformed
- Large purchases – Homes, cars, etc. all should be researched carefully and thoroughly
- Smart shopping – How to save money when shopping for everyday items like groceries and clothing, and how to make a wise purchase decision on something that’s bought less frequently (like, say, a refrigerator)
- Retirement – Including the power of compound interest, and how it works for you much harder the earlier you start to save
- Saving – When to use a savings account instead of an investment account,
- Investing – How you invest, what the major types of investments are, and how stock/bonds work. Including lessons from the history of investing in significant bubbles, busts, and what’s investment vs. speculation
- Taxes – What they are, how they work, and how to keep up to date on tax law changes
These are the basic “how-tos” I would love to see kids know before they finish high school. As I mentioned, money is an essential part of life for all careers and all income brackets. A good grounding in financial basics will go far in their lives.
There are also some items I would love to see people teach their kids, which would be difficult to do in a school setting. This is where we parents can help a lot, by both demonstrating wise behavior in the way we live our lives, as well as having discussions with our kids. I’m thinking of things like:
- Delayed gratification – The power of waiting to get something you want, rather than needing everything right now, would serve kids well
- Spending prioritization – Deciding what you value, and making sure your buying behavior isn’t getting in the way of what you want
- Goal setting – Setting and achieving financial goals can help kids succeed
- Don’t be fooled by ads – All about the various tactics advertisers use to try and make you think that your life will be infinitely better with their product or service
Resources to Help
If you believe that as a parent, you don’t have the knowledge or resources to help your kids with these things, don’t worry. There are some great teaching strategies, coursework, and online education tools out there for you.
- One of my personal favorite sites with some fun, short cartoons for kids about money is Warren Buffett’s Secret Millionaires Club. They have short episodes of pretty much any money topic you want to know about.
- Looking for a good book? My boys enjoyed “How to Turn $100 into $1,000,000“. It has business tips and general money advice
- My oldest son, 14, also liked the Richest Man in Babylon. It was written in the 1920s, but it’s told as a parable of ancient Babylon, and my son liked the story aspect of the book
- The Treasury Department has a “Kids Zone” you can check out
- I highly recommend taking a look at the requirements for the Boy Scouts “Personal Management” merit badge. This is something teens who are scouts do, but it can also be useful for non-scouts
- I also have a great “Kids and Money” section on my site – updated often with the new kids and money articles I write
It may be ideal for schools to teach basic money skills to kids in the classroom, but right now, that’s not the reality. In the meantime, while this isn’t the case, we parents have to take charge and make sure our kids have the financial skills they need to succeed in whatever they choose to do once they leave our homes.
What money skills do you teach your kids? Any other subject area I missed that you would like to see covered? Let me know in the comments!
My name is Liz, and I’m 39 years old. I have three wonderful boys – ages 15, 12, and 4 – and have been married to my stay at home dad, husband for the past seventeen years. Personal finance and investing have been a hobby and passion of mine since I was a teenager. A huge part of my success, and overcoming obstacles, has been reading inspiring stories of other women who had done the same.